City of San Jose v. Monsanto Co.

231 F.Supp.3d 357

CITY OF SAN JOSE, Plaintiff,

v.MONSANTO COMPANY, et al., Defendants.

City of Oakland, Plaintiff,

v.Monsanto Company, et al., Defendants.

City of Berkeley, Plaintiff,

v.Monsanto Company, et al., Defendants.

Case No. 5:15–cv–03178–EJD

Case No. 5:15–cv–05152–EJD

Case No. 5:16–cv–00071–EJD

United States District Court, N.D. California, San Jose Division.

Signed February 3, 2017

Carla Michelle Burke, Celeste Andrea Evangelisti, Paul Scott Summy, Brett Land, Baron and Budd, P.C., Dallas, TX, John H. Gomez, John Paul Fiske, Gomez Iagmin Trial Attorneys, San Diego, CA, Nora Valerie Frimann, J. Richard Doyle, Office of the City Attorney City of San Jose, San Jose, CA, for Plaintiff.

Robert Mont Howard, Jennifer P. Casler–Goncalves, Kelly Eugene Richardson, Latham and Watkins LLP, San Diego, CA, Andrea Maria Hogan, Latham & Watkins LLP, San Francisco, CA, for Defendants.

ORDER DENYING DEFENDANTS' MOTIONS TO DISMISS PLAINTIFFS' FIRST AMENDED COMPLAINTS

EDWARD J. DAVILA, United States District Judge

In these related cases, Plaintiffs City of San Jose, City of Oakland, and City of Berkeley (the "Cities") seek damages from Defendants Monsanto Company, Solutia Inc., and Pharmacia LLC ("Monsanto"). From the 1930s to the 1970s, Monsanto manufactured and sold products containing environmental contaminants called polychlorinated biphenyls ("PCBs"). The Cities allege that Monsanto's PCBs pollute the San Francisco Bay (the "Bay") through stormwater and dry weather runoff from the Cities, forcing the Cities to spend money to reduce PCB discharge in order to comply with state and federal regulations.

The Cities each allege a single cause of action for public nuisance. Before the Court are Monsanto's motions to dismiss the Cities' first amended complaints. Case No. 15–cv–3178, Dkt. No. 103; Case No. 15–cv–5152, Dkt. No. 81; Case No. 16–cv–71, Dkt. No. 71 (together, "MTD"; these motions are identical). The Cities have filed a single joint opposition. Case No. 15–cv–3178, Dkt. No. 106; Case No. 15–cv–5152, Dkt. No. 84; Case No. 16–cv–71, Dkt. No. 74 ("Opp.").

The Court finds that the Cities have stated a claim for public nuisance. Monsanto's motion to dismiss will be DENIED.

I. BACKGROUND

A. Facts

The Cities' allegations are largely identical, with some variations (discussed below) regarding their use of captured stormwater and their trusteeship of public land. Case No. 15–cv–3178, Dkt. No. 91 ("San Jose FAC"); Case No. 15–cv–5152, Dkt. No. 81 ("Oakland FAC"); Case No. 16–cv–71, Dkt. No. 71 ("Berkeley FAC") (together, "FACs").

PCBs are synthetic chemical compounds that have become notorious as global environmental contaminants. Id. ¶ 1. PCB exposure can cause a number of health issues in humans, including cancer. Id. ¶ 2. PCBs also destroy populations of fish, birds, and other animal life. Id. ¶¶ 2, 4, 36–46. Until they were banned in the 1970s, PCBs were used in a variety of applications, including paint, caulking, electrical equipment, sealants, inks, and lubricants. Id. ¶¶ 5, 33.

The Cities operate municipal stormwater and dry weather runoff systems, which collect runoff and discharge it into the Bay. Id. ¶ 13. When it rains, PCBs often leach into stormwater runoff, causing the Cities to discharge PCBs into the Bay Id. ¶¶ 5–6, 35. As a result, the Bay has become contaminated with PCBs. Id. ¶¶ 7–10.

The U.S. Environmental Protection Agency ("EPA") has approved a PCB Total Maximum Daily Load ("TMDL") for the Bay, which defines the maximum amount of PCBs that the Bay can receive while still meeting water quality standards. Id. Because they discharge stormwater into the Bay, the Cities are required to obtain Municipal Regional Stormwater Permits from the San Francisco Bay Regional Water Quality Control Board. Id. ¶ 13. Each of the Cities has received such a permit, which includes a TMDL that limits the amount of PCBs the Cities may discharge into the Bay through stormwater. Id. ¶¶ 14–15. In 2015, the Water Quality Control Board increased the PCB TMDL, which forced the Cities to spend money to meet the stricter requirements. Id. ¶¶ 17–19. The Cities now seek damages from Monsanto.

B. Monsanto's First Motion to Dismiss

In their original complaints, the Cities alleged causes of action against Monsanto for public nuisance and equitable indemnity. Case No. 15–cv–3178, Dkt. No. 1; Case No. 15–cv–5152, Dkt. No. 1; Case No. 16–cv–71, Dkt. No. 1. This Court granted Monsanto's motions to dismiss, finding that (1) the Cities lacked standing to claim public nuisance because they failed to show that they have a property interest in polluted stormwater, and (2) the Cities did not state a claim for equitable indemnity because their costs arose from regulatory requirements rather than from an adverse judgment. Case No. 15–cv–3178, Dkt. No. 85. The Court granted leave to amend only as to the cause of action for nuisance. Id.

C. The Cities' First Amended Complaints

The Cities filed their FACs on September 13, 2016, each bringing a single cause of action for public nuisance. The Cities now allege damage to three property interests:

(1) contamination of the Cities' stormwater and dry weather runoff systems, which must be retrofitted to remove PCBs;

(2) contamination of tidelands and submerged lands in the Bay that the Cities hold as trustees; and

(3) contamination of stormwater and dry weather runoff that the Cities capture and use.

See Opp. at 1 (summarizing the three property interests at issue in the FACs).

II. LEGAL STANDARD

A motion to dismiss under Fed. R. Civ. P. 12(b)(6) tests the legal sufficiency of claims alleged in the complaint. Parks Sch. of Bus., Inc. v. Symington , 51 F.3d 1480, 1484 (9th Cir. 1995). Dismissal "is proper only where there is no cognizable legal theory or an absence of sufficient facts alleged to support a cognizable legal theory." Navarro v. Block , 250 F.3d 729, 732 (9th Cir. 2001). The complaint "must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ).

III. DISCUSSION

A. The Cities' Public Nuisance Claims

i. The Cities allege a property interest in captured stormwater under AB 2594.

A public entity can bring a non-representative nuisance action for damages only if "it has a property interest injuriously affected by the nuisance." Cty. of Santa Clara v. Atl. Richfield Co. , 137 Cal.App.4th 292, 314, 40 Cal.Rptr.3d 313 (2006) (quoting Selma Pressure Treating Co. v. Osmose Wood Preserving Co. , 221 Cal.App.3d 1601, 1616, 271 Cal.Rptr. 596 (1990) ).

This Court granted Monsanto's earlier motion to dismiss because the Cities failed to show that they have a property interest in stormwater that flows through municipal pipes to the Bay. Dkt. No. 85 at 6–8. Under the California Water Code, public water belongs to the State of California, not to the Cities. Id. ; see also Cal. Water Code §§ 1201 ("All water flowing in any natural channel," unless used or appropriated, "is hereby declared to be public water of the State and subject to appropriation in accordance with the provisions of this code."), 10574 (exempting rainwater from the permitting requirements, which implies that rainwater falls within § 1201 and thus belongs to the State); California v. United States , 438 U.S. 645, 652 n.7, 98 S.Ct. 2985, 57 L.Ed.2d 1018 (1978) ("Under California law, any person who wishes to appropriate water must apply for a permit from the State Water Resources Control Board.").

But the tides shifted when California enacted AB 2594 on September 23, 2016—about one month after this Court granted Monsanto's earlier motion to dismiss, and ten days after the Cities filed their FACs. AB 2594 added the following language to the California Water Code to allow public entities to capture stormwater and put it to use: "A public entity that captures stormwater from urban areas, in accordance with a stormwater resource plan, before the water reaches a natural channel shall be entitled to use the captured water to the extent that the water augments existing water supplies." Cal. Water Code § 10561.7(a). Monsanto and the Cities agree that the new rule gives the Cities a right to use captured stormwater. See MTD at 16 ("AB 2594 gives new—but limited—use rights" to the Cities to use captured stormwater); Opp. at 6 (AB 2594 creates both "a usufructuary interest ... and a property right" in captured stormwater). Under the new rule, the Cities "shall be entitled to use the captured water," but the State continues to own it. Cal. Water Code § 10651.7(a).

The right to use the captured water under AB 2594 is a sufficient property interest on which to state a claim for nuisance. See In re Methyl Tertiary Butyl Ether (MTBE) Prods. Liab. Litig , 457 F.Supp.2d 455, 460 (S.D.N.Y. 2006) ("a usufructuary interest may be acquired and this interest will be deemed to be a ‘possessory property right’ " for the purposes of a nuisance action); Nat'l Audubon Soc'y v. Sup. Ct. , 33 Cal.3d 419, 441, 189 Cal.Rptr. 346, 658 P.2d 709 (1983) ("[T]he right of property in water is usufructuary, and consists not so much of the fluid itself as the advantage of its use.... Hence, the cases do not speak of the ownership of water, but only of the right to its use.") (citations omitted).

Yet, Monsanto argues, the Cities lack that right: even if AB 2594 granted the Cities a right to use captured water, they can have no property interest in water that they abandon and discharge to the Bay. MTD at 16. AB 2594 creates a right to use "captured stormwater to the extent that the water augments existing water supplies ." Water discharged to the Bay does not augment existing supplies, and the alleged nuisance exists only in water discharged to the Bay. San Jose FAC ¶¶ 121–35; Oakland FAC ¶¶ 121–36; Berkeley FAC ¶¶ 123–138.

The Cities respond that Monsanto's distinction between "capture...